Swedish arms and aviation manufacturer Saab will invest $38 million in the private Indian defense company Pipavav Offshore and Defense Engineering.

Saab will buy new shares offered to it by Pipavav ODE, formerly called Pipavav Shipyard.

Pipavav specializes in modular ship construction and has its head office in Mumbai.

Its extensive infrastructure facilities are adjacent to Pipavav Port in the state of Gujarat on the west coast.

Port Pipavav, India's first private-sector port, handles containers as well as bulk and liquid cargo.

The Saab deal with Pipavav is dependent on approval by shareholders at a Pipavav ODE extraordinary general meeting to be called before the end of the year.

"After the investment, Saab will hold approximately 3.5 percent of the capital and votes in Pipavav," a statement from Saab said.

The announcement follows a memorandum of understanding for the share offering signed by the companies in August. At the same time, both companies signed a technical partnership agreement to continue of co-operation on major projects.

In 1997, the government set up what became Pipavav as a wholly owned subsidiary of the private Indian infrastructure seed company SKIL Infrastructure -- formerly called Sea King Infrastructure Ltd.

In 2005, SKIL's shipbuilding business, with funding from major Indian financial institutions, was spun off and registered as Pipavav Shipyard Ltd. The company went public in 2009 with listings on the Bombay Stock Exchange and the National Stock Exchange.

Now called Pipavav ODE, it is the largest shipyard in India, the company says. It covers nearly 500 acres and includes around 2,400 feet of shoreline and 2,250 feet of outfit quay that can accommodate ships of up to 400,000 DWT.

It builds and services offshore structures including floating production storage and offloading vessels, jack-up rigs, unmanned well-head platforms, legged jackets and various topside process modules.

In November last year, Pipavav delivered the first Panamax bulk carrier of 74,500 DWT to international customers.

Saab and Pipavav formed a joint combat system engineering group that analyses naval combat system design and are exploring combat management systems for the Indian navy and coast guard, the Saab statement said.

In July Pipavav signed a deal with Larson and Toubro and state-run shipbuilder Mazgaon Docks to cooperate on the construction of submarines and warships, a report by Indian defense news website Brahmand.com said.

Mazgaon, owned by the government since 1960, is based at Mumbai and container port Nhava Sheva, officially called Jawaharlal Nehru Port, on the coast of Maharashtra state.